Manhattan Associates's (NASDAQ:MANH) Q1: Beats On Revenue But Gross Margin Drops

Max Juang /
2024/04/23 4:11 pm EDT

Supply chain optimization software maker Manhattan Associates (NASDAQ:MANH) reported Q1 CY2024 results topping analysts' expectations, with revenue up 15.2% year on year to $254.6 million. The company expects the full year's revenue to be around $1.03 billion, in line with analysts' estimates. It made a non-GAAP profit of $1.03 per share, improving from its profit of $0.80 per share in the same quarter last year.

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Manhattan Associates (MANH) Q1 CY2024 Highlights:

  • Revenue: $254.6 million vs analyst estimates of $243.3 million (4.6% beat)
  • EPS (non-GAAP): $1.03 vs analyst estimates of $0.87 (18.4% beat)
  • The company lifted its revenue guidance for the full year from $1.02 billion to $1.03 billion at the midpoint, a 1% increase
  • Gross Margin (GAAP): 53.1%, in line with the same quarter last year
  • Free Cash Flow of $52.42 million, down 39.3% from the previous quarter
  • RPO: $1.5 billion, up 31% year on year
  • Market Capitalization: $14.06 billion

“We are very pleased with our solid start to 2024 and better than expected first quarter results. Manhattan’s fundamentals are strong, as demand continues to drive favorable pipeline and revenue momentum,” said Manhattan Associates president and CEO Eddie Capel.

Boasting major consumer staples and pharmaceutical companies as clients, Manhattan Associates (NASDAQ:MANH) offers a software-as-service platform that helps customers manage their supply chains.

Vertical Software

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Sales Growth

As you can see below, Manhattan Associates's revenue growth has been mediocre over the last three years, growing from $156.9 million in Q1 2021 to $254.6 million this quarter.

Manhattan Associates Total Revenue

This quarter, Manhattan Associates's quarterly revenue was once again up 15.2% year on year. On top of that, its revenue increased $16.3 million quarter on quarter, a strong improvement from the $186,000 decrease in Q4 CY2023. This is a sign of acceleration of growth and very nice to see indeed.

Looking ahead, analysts covering the company were expecting sales to grow 9.4% over the next 12 months before the earnings results announcement.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Manhattan Associates's free cash flow came in at $52.42 million in Q1, down 9.7% year on year.

Manhattan Associates Free Cash Flow

Manhattan Associates has generated $235.9 million in free cash flow over the last 12 months, an impressive 24.5% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.

Key Takeaways from Manhattan Associates's Q1 Results

It was good to see Manhattan Associates beat analysts' revenue and EPS expectations this quarter, driven by strong performance in its subscription and services segments. We were also glad it lifted its full-year revenue guidance, which came in higher than Wall Street's estimates. On the other hand, management cited macroeconomic volatility in its end markets. Overall, this quarter's results seemed fairly positive, but management's comments likely spooked investors, especially given last quarter's weakness across the broader software sector. The stock is down 5% after reporting, trading at $219.1 per share.

So should you invest in Manhattan Associates right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.